Posts Tagged ‘McKinsey & Company’

Growth in self employment points to need for non-group medical coverage

June 7th, 2017 Comments off

Another reason insurers will likely return or work to remain in the individual market is that it’s part of the future of health care, says Counihan. With so many people now working for themselves in the “gig economy,” he says, selling insurance “is going to be more business-to-consumer than business-to-business.””This market could grow,” agrees Giesa. “And I don’t think [insurance companies] want to be left out completely from this market if there’s an opportunity to break even, or make a little money. “In the end, says Counihan, regardless of what he considers the Trump administration’s “disorganized neglect, I think this market is here to stay.”

Source: What Happens If The Individual Health Insurance Market Crashes? : Shots – Health News : NPR

Kevin Counihan served as head of the Department of Health Service’s insurance exchange program in the Obama administration. Kurt Giesa is an actuarial expert at the consulting firm Oliver Wyman.

While most working age Americans are covered by employer medical benefit plans that have dominated since the 1940s, there are indications this is changing and pointing to the need for a viable method of financing medical care outside of employer group coverage. The executive summary of a recent McKinsey Global Research survey reports 20 to 30 percent of the working-age population in the United States and the EU-15 countries are engaged in some form of non-employment vocation.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Exchange subsidies, narrow managed care networks credited for stabilizing individual market

May 19th, 2016 Comments off

Before the majority of the individual market reforms of the Patient Protection and Affordable Care Act took effect in 2014, the individual health insurance market was mired in a death spiral of adverse selection and rapidly rising, unsustainable premiums. Now those reforms have brought stability to the market, with little risk of the market segment destabilizing, concludes a McKinsey & Company analysis. (h/t to Liz Osius of Manatt).

Key to achieving that stability are subsidies offered households with incomes not exceeding 400 percent of federal poverty levels and health plans’ use of managed care plans and narrow provider networks. The brief notes that an estimated 69 percent of households in the individual market qualify for premium and out of pocket cost sharing subsidies.

The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies to those with incomes below 400% of the federal poverty level. Given the unique regulatory conditions of this market, the key determinants of its stability are not the traditional factors (risk and cost of care for this segment), but rather the ongoing subsidy payments.

McKinsey & Company’s review of plan issuer profitability correlated narrow networks with comparatively better loss experience and profitability compared to plans with wider networks as well as the ability of these plans to set lower premium rates. “The combination of the improving relative pricing of narrowed networks and their superior financial performance suggests that they may be emerging as one sustainable element of exchange plan design,” the McKinsey issue brief states.

Although the individual market has regained stability, profitability remained elusive in the first two years of the major reforms:

Our initial perspective, based on emerging financial results reported for 2015, is that aggregate losses in the individual market may have doubled from 2014, with post-tax margins between –9% to –11% (Exhibit 6). The larger losses are most likely the result of two primary factors: higher year-over-year medical loss ratios (MLRs) (around 4.5% to 5% margin reduction) and lower reinsurance payments (another 3.5% to 4% margin reduction).


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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